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How One Startup Grew a $100M Business Without Spending Venture Capital

For many startups, raising a round of funding is a day of celebration. It’s exhilarating knowing that someone believes enough in your idea to put money behind it. Raising a round, though, doesn’t mean that a startup has “made it” or that the entrepreneurs behind the venture are on their way to tech stardom.

It isn’t always, though, the best route for every startup. In the words of Christian Chabot, CEO and co-founder of Tableau Software, a Seattle-based data analytics and visualization software company, taking venture capital is like having a loan. “Do you feel brilliant and motivated after you take out a big loan?” he asks rhetorically. He and his co-founders avoided venture capital at all costs during their early days and managed to break through the $100 million revenue milestone in December and now has more than 700 employees after nearly nine years of doing business.

Founded in January 2003 by Chabot and two Stanford computer scientists — Chris Stolte and Pat Hanrahan — Tableau was born when “the dot-com bomb was still exploding, and the stock market was hitting a five-year low,” says Chabot.

Having just completed a two-year stint as an associate partner at SoftbankSoftbank Venture Capital, Chabot says he had seen firsthand what happens to young companies that raise too much money too fast. “I also saw what happens when venture capitalists get too much control of a missionary technology venture – and it’s generally not good.”

Chabot’s venture capital experience aside, his co-founders — the technology and development minds behind Tableau — were naturally skeptical of investors, leading the team to bootstrap from day one.

While the company did eventually raise a $5 million Series A in 2004 and a $10 million Series B in 2008, it all begin with three entrepreneurs who brought a few thousand dollars each to the table. Even today, every dollar of venture capital Tableau has raised is in its bank account, says Chabot. And raising that money was all about timing.

We spoke earlier this month about how Tableau managed to grow its $100 million business without spending any venture capital. Chabot provided a few key nuggets of advice for entrepreneurs looking to bootstrap to success.

“I believe it’s a myth that you need to bring a lot of capital to the table in order to be able to bootstrap,” says Chabot. “Frankly, I don’t think most people are willing to make the sacrifices that you need to make to be an entrepreneur and to bootstrap a company from nothing.”

Chabot says that the Tableau trio brought modest amounts of money to the table, to the tune of a few thousand dollars each, “But most importantly, we worked for free.”

“The hardest thing you have to do when you bootstrap is to work for free. There’s no income. It’s not that you have to be cutting big checks necessarily – there’s just no income. So you have to be able to adjust your lifestyle for some period of time, maybe a year or year-and-a-half.”

Tableau was able to run with capital efficiency in its early days because its founders took up modest lifestyles in order to save money. Chabot, for example, at 28 years old and having come out of venture capital, downsized his entire personal life and lifestyle. He moved from a two-bedroom apartment to a one-bedroom, cut out his television bill and cancelled his magazine and newspaper subscriptions, for starters. He also cut his personal spending drastically in other areas a year in advance of starting the company. He suggests that aspiring entrepreneurs make budgets a year out from starting up and stick to them. Cut out everything that’s unnecessary.

Stolte had just finished his studies, so the bootstrapping lifestyle wasn’t too much of a change from his student lifestyle. And Hanrahan also led a modest lifestyle as a tenured professor, says Chabot, so bootstrapping wasn’t much of an issue to his personal lifestyle, either.

The takeaway here, though, is that bootstrapping entails working for free and cutting out the unnecessary comforts. Entrepreneurs must accept this and make plans that acknowledge and bend to these realities.

Start Pitching on Day One

A look at how the Seattle Timesis using Tableau Software to engage readers.

For software startups, Chabot says that entrepreneurs should be selling as soon as humanly possible. “Most people wait way too long before they go try to sell what they have.” Stay away from these common excuses, he advises:

“We’re still building it.”

“We haven’t tested it.”

“It’s not going to ship until the end of the year.”

None of these common retorts, Chabot says, prevent a startup from selling its idea today. “If you’re really onto something valuable, new, and important, you can actually get customer interest, feedback, and maybe early orders even before your prime time.”

“One of the great advantages as a software company is that you have a product that has a price tag. From the first days of forming the company, we would get in our cars, put our laptops in the backseat, and drive around trying to sell our idea.”

Tableau’s founders were upfront when sharing their prototypes with potential clients, disclosing that the product hadn’t been tested, was missing a few basic features, and didn’t come in a shiny box. “But it did a few magical things that could really help someone,” says Chabot.

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Having taken a few start ups through A/B/C rounds and 2 IPOs I agree with the founder’s approach. I use and recommend their product to clients because it is an “enabler” making any business analyst a lot more insightful. They could add a few more things but typically use their client base recommendations as a guide.

I would only add that they missed the most important point in creating a company without VC funds: make sure you all enjoy and have fun.

Wow, such an awesome and inspiring article. We love Tableau, and it’s functionality and use-ability is stellar. I love hearing how they bootstrapped in the early days and saved their cash. Killer story. Thanks!

We have been focused on low burn rates as our model when launching start-ups and validating the business model whether for medical technology or our latest social e-commerce venture recently launched beta Flash Purchase. The other great takeaway from this article is getting out in front of the market to see how your product/technology is received to generate potentially early sales as well as to determine the appropriate market segments to target. This also enables you to make modifications of the product based on market feedback. Having something tangible, even if blemished, enables you to start the sales process and gain key learnings for future growth.

We are in the same position right now. Revenues are high (around 30 million), no venture captial taken so far. The company doesn’t need money but we could speed up the grow process a bit… by a couple of million extra cash. However it seems like the whole thing doesn’t worth it. I understand VCs that it is pointless to invest say 5 million and get less than 5 percent. What do you suggest?

I think it depends on your business. VCs will do a minority stake in a late-stage deal. It’s done all the time. But it depends on how much growth you can get from that $30 million and what your margins look like, your exit potential, etc. Tell us more.

I’m very excited about the news!!! its a dream come true :) I wish i would of had the opportunity to meet you all in person. I hope everyone has a great Holiday Happy New Year in 2013!! Until tomorrow ….

It is a cyber security business with customers from defense industry. What we did is mainly services and research contracts but we need money for productization our solutions. Regarding the growth I am sure we can achieve a huge growth rate in 2 yrs time. (margins are more than 60% due to the fact that we don’t owe money to investors, so far ) We’ll see… Anyways, the real takeaway for me is this: bootstrapping is a great way to start and what comes after is another story…

Really good article and content however this is not exactly bootstrapping & the title is misleading :building a $100m business without VC ” they raised a $5m series A within 12 months of founding the company and then a subsequent $10m in 08′ all that being said $100m milestone of revenue in a hot market such as visualization with on $15m raised is a great achievement.

Great article ! I especially liked these 3 key take aways : 1. the Lean start idealogy -using bedroom /basement as the start. 2.Go viral about the idea even before building the first prototype. 3. build the cash flow engine before attracting investors.Nothing can be more proving than a strong income statement.

Thanks Erica. I love your premise and agree with the overall message you are conveying. Tableau’s story is inspirational and there is a lot of wisdom in the belt-tightening methods that Chabot used. However, there is one point I’d like to question/challenge you on.

The idea that “The right people thrive in low-cost environments and are totally up for working at a fraction of the market rate for their given position if it means working on a cool product they are excited by” implies that we are going to let these people thrive in the long run.

Nothing is more endearing than a CEO who sacrifices luxury to devote resources to a fledgling business. That kind of leadership generates loyal followers. If that CEO continues to put the mission ahead of his own comfort, he will have no trouble finding employees who are willing to do the same.

It is easy to be diverted from this lofty goal and forget about those workers who sacrificed along with you. The moment they feel that they are the only ones who are still sacrificing, a CEO will have a mutiny on his hands with the talent that helped him build his dream jumping ship to join companies that are willing to pay them what they are worth.

There are many low cost ways to avoid such a crisis. Here are a few examples.

1. Employee ownership: When workers own even a fraction of a percentage of a company they begin to equate corporate profits with personal profits.

2. Flexibility: Allowing employees to telecommute and work unorthodox hours will not only keep existing talent from jumping ship for an extra couple bucks, but opens up new pools of talent like college students and single parents.

3. Perks: Let your workers use company equipment for personal use as long as their productivity meets your expectations. Not only will they be thankful to have a cool boss, you will get some free publicity every time they tag themselves at your office, bragging about the cool new product they are building for you.

Erica this is probably one of the only business articles to have made my year. After bootstrapping {s}hareCLOUD for a year, I started to doubt my decision. I am ready to see my $100 million year soon. Thanks for a really nice article and for keeping the bootstrappers alive. The take-away , for me at least, is to sale and make your own way. Then you can sit back and watch the VCs knock on your door. Awesome!

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Great job! But talking about this thing depends primarily on the kind of venture you had and how feasible it is to the market. Hard work and perseverance are given but most precisely the major factor that would give skyrocketing results to your venture is how much you please your market.

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